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US new-home sales drop 3.3 per cent in February; cold weather continues to limit buying

WASHINGTON - Fewer people bought new U.S. homes in February. Sales fell to their slowest pace in five months, a sign that the housing market has yet to recover fully from brutal winter weather.

Sales of new homes declined 3.3 per cent last month to a seasonally adjusted annual rate of 440,000, the Commerce Department said Tuesday. That was down from a revised rate of 455,000 in January.

Buying dropped off during February in the Northeast, which was battered by snowstorms. It also fell in Western states, where last year's price increases have made homes less affordable.

New-home sales have declined 1.1 per cent over the past 12 months. Despite the seasonal hit by a cold winter, sales are still on track to exceed the 428,000 total from 2013, when they rose 16.3 per cent to their highest level in five years

Most economists expect sales to rebound as the weather improves and the spring buying season begins. Not only does warmer weather bring more traffic to open houses, but families are usually reluctant to move in the middle of the school year.

Still, several other indicators from February suggest that a sector-wide rebound has yet to begin.

An index tracking mortgage applications fell last month to its lowest level since December 2000. The Mortgage Bankers Association reported its seasonally adjusted index of refinancing and home-buying demand dropped 8.5 per cent to 348.5 in the week ended Feb. 21.

The National Association of Realtors said last Thursday that sales declined 0.4 per cent last month to a seasonally adjusted annual rate of 4.6 million. That was the sixth decline in the past seven months.

The National Association of Home Builders/Wells Fargo builder sentiment index was 46 in February. Readings below 50 indicate that more builders view sales conditions as poor rather than good.

And builders started work on 907,000 homes at a seasonally adjusted annual rate in February, the Commerce Department said last week. That was down 0.2 per cent from January, when construction had fallen 11.2 per cent.

Freezing temperatures and snowstorms have caused a slip in housing activity this past winter while higher mortgage rates and higher prices had acted to slow growth earlier in 2013.

The Standard & Poor's/Case-Shiller 20-city home price index reported Tuesday that prices rose a healthy 13.2 per cent in January compared with 12 months earlier. That's down slightly from a 13.4 per cent increase in 2013.

Borrowing costs have also increased over the past year.

The average rate on a 30-year mortgage was 4.32 per cent last week. Rates surged about 1.25 percentage points from May through September, peaking at 4.6 per cent. Those increases began after the Federal Reserve signalled that it would begin to pull back from its bond-buying program.

Those Fed bond purchases were designed to keep long-term interest rates low to spur more borrowing and boost economic growth. Since December, the Fed has reduced the size of its monthly purchases to $55 billion from $85 billion.

The Canadian Press

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